Lockheed Martin: Well Versed In Unethical Lobbying (Part I)

Recently I examined the lobbying expenditures of Booz Allen Hamilton in comparison with the other contracting companies that vie for the monetary attention of the US government. I discovered that strangely—though they are the 14^th largest US Government contracts holder— Booz Allen doesn’t have much of a presence on K Street. As I also pointed out, this couldn’t be further from the truth with the other companies on that list. Their lack of spending was an anomaly and so I decided to take a closer look at the other companies who have so obviously found value in the art of the Washington lobby. The top player on that list of Federal contracts awarded, and naturally the first company to examine was Lockheed Martin which spent at least $15.3 million in lobbying last year.

First, a quick historical primer on the company:

Lockheed Martin is a company with roots that date back nearly to the dawn of heavier-than-air flight. Just prior to the start of World War II, Lockheed opened up its Skunk Works facility in Burbank California and quickly began to land government contracts for planes such as the P-38 Lightning and the Ventura. Through the next two decades following the War, Lockheed would continue to win contracts and produce some amazingly successful planes such as the C-130 Hercules (which is still used today nearly 60 years later for reasons we’ll get into further down), the Cold War workhorse spy-plane the U-2, and the plane that any boy growing up in the 1970’s or 80’s drew ad nauseam in the margins of their schoolwork, the SR-71 Blackbird. But in the late 60’s and early 70’s their luck would change with a number of troubled projects including the C-5 Galaxy and the cancelled AH-56 Cheyenne Helicopter, and the company found itself in serious financial trouble. Lockheed applied for and received an— at the time— unprecedented massive bailout from the Federal Government. Of course the bailout left a bad taste in a lot of people’s mouths, but shortly thereafter it was also revealed that Lockheed had added insult to injury and had actually used millions of dollars from the bailout to bribe foreign officials to land foreign contracts. On a more positive note, the scandal (along with a number of others including Bananagate) did ultimately result in the passing of the Foreign Corrupt Practices Act of 1977, so there’s that. So anyway, after a couple of resignations from the ensuing fallout and not much else, Lockheed pushed on, fought off a hostile takeover attempt and locked down a number of acquisitions over the next two decades including Martin Marietta and divisions of General Dynamics which brings us to where we are today.

So now, in light of the bribery scandal of the 1970’s, it’s unquestionable that Lockheed has previously engaged before in unethical business behavior to achieve its goals. The problem is that, as I’ll point out, they continued to operate in an ethically ambiguous manner. They aren’t alone in this, of course, but here’s the rub: the dark art of the multi-billion dollar contracting business lies in the murky grey area between legal and illegal, ethical and unethical. I like to refer to this area as the billion dollar buffer-zone, and Lockheed is a master of navigating within its confines.

A prime example of Lockheed operating in the billion dollar buffer zone is in their C-130 Hercules deals post 1978. It was right around that time that the Pentagon decided that they were fully loaded on C-130’s and didn’t really need to order any more. The truth was, the Department of Defense had been considering dropping the C-130 since 1963, as they were looking to acquire a newly designed plane—one with shorter landing capabilities— which would be better suited to the Pentagon’s overall mission. After all, the C-130 project was "ripe for replacement because they have been in operation since the Korean and Vietnam Wars, making parts and maintenance very expensive." In 1972 they had issued a formal request for proposal (RFP) and by 1973 had given contracts to both Boeing and Douglas to build and test two prototypes each.  Lockheed, already in financial distress, sensed that one of its key programs was in danger of being decommissioned and decided it best to circumvent the Pentagon entirely and instead take the issue straight to Congress. In a successful effort via Congressional earmarks, Lockheed managed to turn a DoD request for five more C-130’s over the course of the following twenty years into a Congressional order of 256.  Here’s how they did it:

“…Lockheed lobbied members of Congress who represent states and districts with C-130 production facilities or parts manufacturers. The most prominent group in this category has been the entire Georgia state delegation because the plane is assembled in Marietta, Georgia. Second, Lockheed increases congressional demand for new planes by identifying aging C-130 units in National Guard and Reserve units throughout the country. National Guard and Reserve units are ideal because, again, their inventories often consist of whatever the active-duty forces send their way and because the officers and enlisted men typically are part-time and reside in the states and congressional districts that the air station calls home. So Lockheed identifies and lobbies those members of Congress who represent the districts and states in which the bases are located…Lockheed then prioritizes these prospective C-130 replacements according to need and political opportunities to increase support in Congress. Not all members' C-130 needs can be satisfied in any one fiscal year, however. Lockheed strategically lines up potential senators and representatives to support current add-ons designated for other states and districts by committing to lobby for their own add-ons in the future. As one congressional aide put it, Lockheed has become adept at managing support for the tactical airlifter with "C-130 math" to make sure that, during any given fiscal year, a substantial and often influential cadre of members supports the C-130 add-on. By following this strategy from year to year, Lockheed has been able to turn what was to be the C-130's doom in the 1970s into a regularly funded military spending program, all without a single request having been sent by the administration to Congress.”

That last sentence sums it up. Lockheed managed to churn billions of dollars in revenue out of a losing proposition on an outdated program, not because it was what was best for the country’s military (because it certainly wasn’t) but because it was what was best for the company’s bottom line. Simple as that.

And what did the citizens of the United States get for their tax dollars? 251 planes that the Military didn’t want or need. Perhaps worst of all is what became of many of these multi-million dollar planes once they had been purchased. Jeremiah Goulka points out:

“The Air Force didn't have the space for them, so they retired some older models that still had plenty of life in them and shunted most of the rest off to the Air Force Reserves and Air National Guard.”

Many sat unusable for years in hanger bays and on tarmacs around the country because an additional problem was that:

“…sufficient operating and maintenance funds didn't always come with the planes…”

To those that are aware of Lockheed's penchant for shady dealings, this sort of behavior is enraging but not all that surprising. But for those unacquainted with the lobbying antics of the military industrial complex (and other industries), this sort of wasteful result might seem shocking but the odd occurrence. It’s not. The results aren’t always as dramatic as the C-130 fiasco, but these kind of scenarios are the rule unfortunately, not the exception.

Of course, at this point, without further explanation lobbying might seem like some sort of voodoo ritual, a mysterious ceremonial dance that magically produces billion dollar results.  After all, the C-130 deal that Lockheed pulled off certainly seems like an act of magic. In the second part of this post, I’ll take a look into the methods and strategies that contractors like Lockheed use to coerce those in Washington with a grip on the purse strings and will begin to explain how, in so many ways, it is detrimental it is to our Democracy.  

Examining the Lobbying Effort of Booz Allen Hamilton (or Lack Thereof).

So, as everyone now knows thanks to whistle-blower Edward Snowden, the US Government via the NSA via a number of private companies has been at best gathering massive amounts of private communications data for later scrutiny if deemed necessary and at worst (though who knows how bad it could get) has been directly spying on unwitting, innocent American citizens.

The immediate question that came to mind when Mr. Snowden stepped forward and revealed that he had worked in an intelligence capacity for Booz Allen Hamilton (BAH) under the direction of the US Government, was how much money had the company spent on lobbying the government for contracts? How much had they spent convincing the US government that they should get the colossal intelligence contracts that created $1.3 billion of their revenue last year alone (and just landed a contract worth an additional five billion over the next five years)? Truth be told, the numbers I pulled up immediately following the question’s formation were perplexingly small.  The Fortune 500 company, which boasts of over 5 billion in annual revenue, has only spent $40,000 in lobbying efforts in the US, and that was more than ten years ago.

This relatively miniscule amount of lobbying cash doesn’t necessarily have to be suspicious, I suppose. There isn’t anything that says that a company is obligated to spend massive amounts on lobbying to acquire large contracts from the Federal Government. Maybe BAH is just stellar at what they do and it’s an easy sell, who can say? Still, to be sitting in the rather comfy position as the 14^th largest US Government Contractor (as of last year), they certainly aren’t behaving like their peers when it comes to lobby expenditures. Let’s break it down:

* Lockheed Martin, the largest Federal Government Contractor (with over 36 billion dollars awarded in contracts) spent at least $15,347,350 on lobbying in 2012.

* Boeing Co, the second largest contractor (with over 29 billion dollars awarded in contracts) spent at least $15,440,000 on lobbying in the same year.

* Raytheon (you guessed it, number three contractor with over 15 billion dollars in contracts) spent at least $7,450,000.

(Side Note: It’s mildly interesting that the ratios of money spent to contracts awarded seem roughly commensurate in these first three examples, although the trend doesn’t seem to extrapolate to the rest of the list.)

Of course, these are the three big boys in the Federal Contracts game. Admittedly, BAH isn’t quite that big. They’re fourteenth, so maybe that would account for the lack of lobbying expenditures. Let’s look at its more comparable competitors.

* Computer Sciences Corporation which comes in one under BAH at number fifteen on the list of Federal Contractors (with over $3.8 Billion in contracts) spent at least $1,532,000 on lobbying efforts in 2012.

* Bechtel Group, the thirteenth largest Federal Contractor ($4.1 billion in contracts) spent a smaller amount, but at $360,000, it still spent considerably more last year than BAH has in ten.

To satisfy my curiosity, I decided to head further down the list and look at a couple more. Textron (#29 on the list) spent nearly $5 million last year on lobbying.  Then I picked Deloitte LLP (#62 on the list), because it was a name that I happened to recognize. Turns out, they spent at least $3.4 million last year.

So, in terms of lobbying efforts, it would seem BAH is certainly the exception to the rule here. How they have directed billions of dollars into their coffers without significant lobbying is beyond me. It doesn’t seem to make much sense.

The military industrial complex is a reality; a behemoth awash in volleyed tax money and quid pro quo deals. The newly minted intelligence industrial complex is also a reality, and would seemingly operate within the same basic model: Lobbying begets contracts which results in more lobbying to get even more contracts and so forth. Right?

Slate’s Matthew Yglesias attempted to connect the dots in a quick post from 6/10, in which he points out:

… the… interesting issue is how it alters the lobbying dynamic. An established government bureaucracy has, of course, considerable capacity to lobby on behalf of its own interests. That's particularly true when the bureacracy's leadership can claim possession of secret information. But it's also constrained in certain respects. The National Security Agency can't bundle campaign contributions, give money to independent expenditure campaigns, or offer nice paydays to former congressional staffers.

But if you take a few billion dollars worth of intelligence spending and transfer it onto the Booz Allen balance sheet, then political organizing around the cause of higher intelligence spending can avail itself of the tools of private enterprise along with the tools of bureaucratic politics.

This would be a valid point and may be applicable to other contractors, but it doesn’t appear to be the case with BAH, who apparently doesn’t have to lobby at all to get the political machine to organize “around the cause of higher intelligence spending” and land the resulting enormous contracts.

So now, after sifting through these numbers, I suppose we come to the payoff—our Double Rainbow moment, if you will—and ask, “What does it mean?” I don’t know. Maybe nothing. Maybe there is no point in this exercise at all except to, in comparison, examine the lobbying practices of most major US government contractors. There is certainly more to look at, but for now the examination and the unanswered question will have to do.